Top 5 Utility Mutual Funds (April 2011)

Utilities funds are an excellent choice for investors seeking a steady income flow. Such funds are also used as defensive instruments, which protect investor capital during a market downturn. This is because the demand for essential services such as those provided by utilities remains unchanged even during difficult times. In recent years, many funds in this category have increased their exposure to emerging markets and unregulated companies. This has increased the risk involved but has also generated higher returns.

Below we will share with you 5 top rated utilities mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future.

Fidelity Advisor Utilities A (FUGAX) seeks capital growth. The fund invests the majority of its assets in public utility companies as well as firms deriving a large share of revenues from related operations. It purchases both domestic and foreign securities. The utilities mutual fund returned 17.68% over the last one year period and has a ten year annualized return of 3.87%.

Douglas Simmons is the fund manager has managed this utilities mutual fund since 2006.

Invesco Utilities Investor (FSTUX) invests a large share of its assets in stocks of companies in the utilities sector or related industries. Firms engaged in the production and distribution of gas and electricity as well as those providing telecom services constitutes its major investments. Up to 25% of the fund’s assets may be used to purchase foreign securities. The utilities mutual fund has a five year annualized return of 4.5%.

The utilities mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.49% compared to a category average of 1.41%.

Vanguard Utilities Index Admiral Shares (VUIAX) seeks to track the performance of the MSCI U.S. Investable Market Utilities Index. This is index consists of companies in the utilities sector regardless of their market capitalization. This utilities mutual fund returned 14.26% over the last one year period.

As of December 2010, this utilities mutual fund held 87 issues, with 6.64% of its total assets invested in Southern Company.

Franklin Utilities A (FKUTX) concentrates on purchasing equity in public utilities companies. More than 25% of its assets are invested in companies that provide electricity, gas, water and communication services. The utilities mutual fund has a ten year annualized return of 6.54%.

John Kohli is the fund manager has managed this utilities mutual fund since 1998.

Rydex Utilities (RYAUX) seeks capital appreciation. The fund invests the majority of its assets in utilities companies whose securities are traded in the US. It focuses on purchasing equity securities and may also invest in derivatives. This utilities mutual fund returned 15.43% over the last one year period.

The utilities mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.88% compared to a category average of 1.41%.

To view the Zacks Rank and past performance of all utilities mutual funds, then click here.

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